Texas is the headquarters for 45 Fortune 500 Companies and home to 14 of the 100 Fastest Growing Businesses in America. (Fortune Small Business Magazine)
Texas ranked 4th on the Business Climate Index. (Tax Foundation, 2004)
If Texas were its own nation, it would represent the world’s 8th largest economy.
Texas recently surpassed California as the largest exporter in the nation.
Cost of living
For Dallas, TX (2005)
Index Score
Composite:
94.4
Housing:
79.4
Utilities:
112.6
Misc. Goods & Services:
97.9
Crime Rate
Texas has the 45th lowest overall crime ranking in the U.S. (FBI, 2004)
Fees & Taxes
Business Inventory Tax Taxed. Exemption applies if inventory is held in state less than 175 days.
Corporate Income Tax Texas and four other States (Nevada, Wyoming, South Dakota and Washington) do not levy corporate income tax.
Personal Income Tax Texas is one of the six States that does not levy any individual income taxes.
Personal Property Tax Texas does not have a state property tax; however it is collected on a local/county level. All real and income-producing tangible personal property not exempt by state or federal law is taxed. Personal property (including automobiles, airplanes, boats and travel trailers) that does not produce income is mostly exempt from taxation.
Texas does not tax intangible property such as stocks, bank accounts or certificates of deposit.
State Sales and Use Tax Base Rate: 6.25%
Machinery Rate: 6.25%
There is an exemption for industrial machinery.
Unemployment Insurance Texas’ new employers’ rate is 2.7% for 1.5 years.
Why is Texas such a sought after destination for incorporation? In 2016, the contribution of Texas to the state’s GDP was $226 billion. According to Forbes, the ranking of this state with regards to economic climate is right at the top. That is not the only reason why there has been such an increase in new business incorporation in Texas. In fact, the business costs in Texas are far lower than that of California and Arizona.
Why Choose Texas for Incorporation?
There are several reasons why there has been a rise in company incorporation in Texas, and one of the prime reasons is the advantages that businesses enjoy. Some of the advantages include:
Franchise Tax
One of the most significant benefits you can derive from company incorporation in Texas is the exemption from franchise taxes although it is not for every business but several business enjoy this benefit. The exemption however varies according to the type of business. Profit and nonprofit corporations are exempted from the IRS under IRC Section 501(c)(2), (16) or (25).
Pass-through taxation
If you are planning to set up a company in Texas then this is another advantage you will enjoy. If you have registered your business as an S corporation, then you will only pay income tax on your income and not on the income of your business.
Protection
Texas’s Business Organizations Code (BOC) allows any individual with necessary capacity to set up a company in Texas. Such an individual can be the president, director, secretary, and shareholder of the corporation. A Texas corporation is supported by a history of provisions and case law, which provides protection to a shareholder and thus limits their personal liabilities.
Credibility
Company incorporation in Texas will help in increasing the overall “credibility” of your business. Which will further develop investor interest in your organization.
How do you incorporate in Texas?
Company incorporation in Texas has its own set of benefits. However, there’s a process that you needs to be followed. To register your C or S Corporation, there are several requirements that must be met. At incparadise.net, we have a team of specialists who can guide you towards setting up your Texas C Corporation, S Corporation, or LLC in the shortest possible time.
Here is a step by step procedure towards incorporation in Texas:
Type of Business: First, you need to identify the business type. You can choose from the following; a general stock corporation, non-profit corporation, sole proprietorship, limited liability company (LLC), limited partnership (LP), general partnership (GP), or limited liability partnerships (LLP).
Business Entity Name: The second step is to select a name for your business, along with the required suffix. The suffix will indicate the type of business entity you have formed. If you opt for a company incorporation in Texas, then it’s essential to do a business name check for the name you’ve selected and reserve it with Secretary of State. This step must be completed before filing your articles or certificate of Incorporation. You can find detailed information on checking business names here. Note: According to the section 5.053 of Business Organizations Code (BOC), you will not be able to choose a name that’s deceptively similar or the same as an existing business name of another entity.
Registered Agent: It’s required that you select a registered agent. The registered agent will be responsible for initiating the processing of your certificate of formation. As a Texas registered agent like incparadise.net, we can also receive any and all legal and business related paperwork on your behalf.
Articles of incorporation: You will need to file a certificate of formation with the Secretary of State. At incparadise.net, we can always file this on your behalf via the standard process or online via the expedited process.
Date Stamped Copies: As a part of the process of company incorporation in Texas, we will ensure that you receive date-stamped and filed copies for your records. The documents are confirmation that the state has filed and formed your corporation.
Costs and Fees associated with Texas Incorporation
What would it cost to set up a company in Texas? Check Fees here!
Texas LLC and Corporation Registration and Formation
The second largest economy in the US, the gross state product of Texas in 2016 was 1.616 trillion. It is also home to 6 of the top 50 Fortune 500 companies. This is one amongst many reasons why company formation in Texas is always considered as the most favorable or beneficial.
The state and local tax burdens in this state is among the lowest and is ranked 8th when it comes to providing a good business tax climate. The growing and stable economy, strong infrastructure, good labor laws, and long-term business growth perspective provides the foundation required to form a Corporation in Texas.
How do you form a Texas LLC or Corporation? Where do you start? The process for registration and formation may seem like an exhaustive one but once you have hired a top Texas registered agent like us, we will ensure, the entire process is simple and quick for you.
Let’s take a look at how to form a Texas business corporation or LLC.
Texas LLC Registration and Formation
An LLC company formation in Texas is governed by title 3 in chapter 101 of the Texas Business Organizations Code (BOC). The procedure for registration and formation of LLC is as follows:
Hire a registered agent
According to the Texas Business Organizations Code (BOC), every LLC is required to maintain a registered agent. Your registered agent can be a foreign entity or a domestic entity and they should be registered to do business in Texas. According to BOC, a limited liability company will not be able to act as its own registered agent. We would take this opportunity to share with you the fact that we are one of the top registered agents in the state and have been responsible for over 11,494 company formations in Texas.
We are in compliance with all regulations in the State of Texas.
Choose a Name
One of the important steps towards formation of a Texas LLC is name registration. Your chosen name should end with any variant of Limited Liability Company abbreviation like XYZ LLC or XYZ L.L.C. According to section 5.053 of the BOC, the chosen name for your LLC cannot be deceptively similar or the same as any other LLC name that exists on record. In order to reserve or register your entity name, you need to download the form 507.
Certificate of Formation
If you are planning to form a Texas business LLC then the most important step is to prepare and file the Certificate of Formation for a Limited Liability Company. The Certificate of Formation (Form 205) has to be filed with the Texas Secretary of State along with the filing fee. We can file the form on your behalf as your registered agent in the state and provide you with certified copies of the LLC registration.
In case, you have any questions, feel free to call us at 702-871-8678. Order LLC now
Texas Corporation Registration and Formation
If you are planning to form a Corporation in Texas then the procedure for registration and formation is as follows:
Hire a registered agent
According to the Texas Business Organizations Code (BOC), every Corporation is required to maintain a registered agent. Your registered agent can be a foreign entity or a domestic entity and they should be registered to do business in Texas. According to BOC, a Corporation will not be able to act as its own registered agent. We would take this opportunity to share with you the fact that we are one of the top registered agents in the state and have been responsible for over 11,494 company formations in Texas.
We are in compliance with all regulations in the State of Texas.
Choose a Name
If you are planning to form a Corporation in Texas, one of the important steps towards formation is name registration. Your chosen name should end with any abbreviation like XYZ Inc or XYZ Incorporate. According to section 5.053 of the BOC, the chosen name for your corporation cannot be deceptively similar or the same as any other business name that exists on record. In order to reserve or register your entity name, you need to download an assumed name certificate or form 503.
Certificate of Formation
In order to form a Corporation in Texas, you will need to prepare and file the Certificate of Formation for a Professional Corporation (Form-203). The Certificate of Formation will be different for both non-profit (Form-202) and Profit Corporation (Form-201). It has to be filed with the Texas Secretary of State along with the filing fee. We can file the form on your behalf as your registered agent in the state and provide you with certified copies of the registration.
If you have any questions regarding Texas incorporation or LLC formation, you can simply visit the Texas Business formation page.
Why should you register a new business in Texas? There are plenty of benefits for business owners but apart from that, this is a state that provides just the right business environment. Texas economy is literally driven by small and medium sized businesses (SME’s) thanks to the progressive business laws that pave the way for innovation to thrive.
Most companies in Texas, LLC or Corporations also leverage the advantages that the state has to offer right from limited liability to privacy, including the favorable tax climate.
This is one of the top advantages that you can enjoy only when you register a new company in Texas. Compared to some of the other states, business tax in Texas is lower. There is ‘no” personal income tax and this provides the much required competitive advantage. Non-existent personal income tax means:
You don’t have to pay any tax on the money you make through your startup company in Texas.
This opens the door for businesses to recruit top talent without having to worry about losing profit.
The good news for small businesses is that the existing low business tax rate can shrink lower depending on the type of business. If the revenue of your startup company in Texas does not exceed a specified threshold then you will be able to enjoy zero business tax.
Favorable tax climate is one of the prime reasons why Texas has been the home to telecom giants.
Advantage#2: Texas Enterprise Fund (TEF)
The Texas Enterprise Fund (TEF) is the real advantage that can strengthen the roots of businesses especially in terms of providing cash grant. If you are currently pondering over the decision of registering a new company in Texas or not then this is the game changer.
Texas Enterprise Fund (TEF) is basically a financial incentive tool where a cash grant is provided for those projects that promise significant job creation as well as capital investment. TEF was implemented in 2004, and since then cash grants exceeding $600 million have been awarded across different industries.
Some of the other programs that can be beneficial for businesses include Texas Enterprise Zone Program, the Skills Development and Self-Sufficiency Fund, all of which are managed by the Texas Workforce Commission, and other local incentives as well as tax abatements.
Are there any Disadvantages of Incorporating in Texas?
If you want to register a new business in Texas, it is one of the best decisions you can make. There are several advantages and only a few disadvantages. If you choose to incorporate your business vis-à-vis form a sole proprietorship then the filing fee is quite steep at $300. Along with this, the process of incorporating your startup company in Texas will require more time as compared to other forms of businesses. Since, Corporations in Texas are monitored by the state, local, and federal agencies, there is more paperwork to be done and it has to be ensured that all documents are in compliance with state regulations.
The only thing that really matters when it comes to incorporating your business in Texas is that the advantages outweigh the disadvantages. Texas is a state that promotes long-term business growth by ensuring you don’t lose your profit in taxes!
Once you have formed an LLC or incorporated your small or medium sized business in Texas, you will be required to apply for a business license to make your LLC or Corporation operational.
The type of license applicable to your business will depend primarily on the business type. There are almost 250 occupational, professional, and facility business license in Texas to choose from and they can be obtained directly from the Texas Department of Licensing and Registration.
Does Texas require a general business license?
In Texas, there isn’t a general statewide business license that applies universally to all businesses. Instead, the licensing and permitting requirements vary depending on factors such as the type of business, its location, and the specific activities it engages in. Many businesses will require one or more specific licenses or permits at the state, county, or municipal level.
So, while Texas doesn’t have a single overarching business license, most businesses will need to obtain the necessary permits and licenses relevant to their industry and location to operate legally. These requirements ensure compliance with state and local regulations and may include licenses for professions, sales tax permits, health permits, zoning permits, and more. It’s essential for business owners to research and fulfill all applicable licensing requirements to avoid potential legal issues and penalties.
How to Obtain a Business License in Texas
Any small or medium sized business working in the State of Texas may require a combination of business licenses and permits from both State and Federal agencies. The fees and licensing requirements will vary depending on the type of business activities, the county or city where your business is located, and the specific government regulations.
To obtain a business license for a Texas-based business, follow these general steps:
Research Your Business Type: Determine the specific licenses and permits required for your type of business. You can use online resources provided by the Texas government or consult with a business advisor to ensure compliance.
Contact Local Authorities: Reach out to the appropriate local authorities, such as the county clerk’s office or city hall, to inquire about any additional permits or licenses required for your business within your locality. Different cities and counties may have specific regulations.
Check Federal Requirements: Some businesses may need federal licenses or permits in addition to state and local ones. Check with the U.S. Small Business Administration (SBA) or relevant federal agencies to identify any federal obligations for your business type.
Gather Necessary Documents: Prepare all required documents for your business license application. This may include proof of identification, business entity registration documents, zoning permits, and any other relevant paperwork.
Submit Your Application: Complete the application forms for the necessary licenses and permits. Ensure that you provide accurate information and include all required documentation. Submit your application to the appropriate authorities along with any applicable fees.
Wait for Approval: Once your application is submitted, it will undergo review by the relevant agencies. The processing time may vary depending on the complexity of your application and the workload of the issuing authority.
Receive Your License: Upon approval, you will receive your Texas state business license. Make sure to display it prominently at your place of business as required by law.
Renewal and Compliance: Keep track of your license renewal dates and ensure ongoing compliance with all applicable regulations. Failure to renew or comply with licensing requirements could result in penalties or the suspension of your business operations.
Remember to regularly check for any updates or changes to licensing requirements to maintain legal compliance and avoid any potential issues for your business operations in the State of Texas.
The Texas Secretary of State’s office can also provide guidance on business licensing requirements. They may offer resources or direct you to the appropriate agencies for your specific needs.
Types of Business License in Texas
As far as business license in Texas is concerned, the state does not require a general business license. This is considered to be an initiative towards creating a more business-friendly approach.
Texas company license can be broadly categorized under the following headings:
Texas professional license
Federal license
Environmental licenses
Licenses that permit businesses to operate in the State of Texas vary from one county or city to another. Let’s look at Dallas for example. You will require a business license for 4 different categories, which are home, alcohol, vending carts, and Sexually-Oriented Businesses. The fee for the above licenses can vary from $25 to $500 except for liquor permits, which will cost you $7,202 plus $690.
On the other hand, if you are planning to operate from Plano, then you will require specific permits under professional business license. The permits include Food Vendor Permit (includes mobile food vendors), Alcoholic Beverage Permit (this is enforced by TABC as well as the City of Plano), Special Event Permit, Commercial Permit (this includes sexually oriented businesses), and Solicitor Permit. The base fee for these permits is $20.
Note: The review and processing of the license application form varies from one county to another but as a norm it can be anywhere from 5 to 14 business days for professional business license in Texas. The maximum processing time for a liquor permit though is approximately 75 business days.
No, but it is recommended to reserve a name prior to filing to ensure that it remains available during the incorporation process.
How do I reserve a corporate name?
The reservation of your corporate name will be handled by IncParadise and is included in the price of our service.
Do I have to renew my name registration?
No.
How do I incorporate in Texas?
When using our service, IncParadise will file, on your behalf, the required administrative forms and articles of incorporation with the appropriate Texas agency.
Is a registered agent required?
Yes. . The registered agent in Texas must have a business office identical to the registered office and must be either: (1) an individual residing in Texas, or (2) a business entity with authority to transact business in the state. As part of our ongoing service, IncParadise does provide a registered agent service option that you can select during the online registration process.
How many Incorporators are required to form a corporation in Texas?
One or more are required.
How many Directors are required to start a corporation in Texas?
One or more as defined by the by-laws and listed in the articles of incorporation.
Are corporations in Texas required to file an Annual Report?
Yes. A report must be filed with the Texas Comptroller before May 16th each year, except for the year of incorporation.
How many Incorporators are required to form a corporation in Texas?
One or more are required.
How many Directors are required to start a corporation in Texas?
One or more as defined by the by-laws and listed in the articles of incorporation.
Are corporations in Texas required to file an Annual Report?
Yes. A report must be filed with the Texas Comptroller before May 16th each year, except for the year of incorporation.
Do Corps and LLCs file annual reports with Texas?
Corporations and limited liability companies (whether Texas or foreign) do not file annual reports with the SOS. However, corporations and limited liability companies are subject to state franchise taxes and are required to file an annual franchise tax return.
Do you have to be a U.S. citizen or resident to incorporate in Texas?
No. There are no restrictions on who can incorporate or own shares in a corporation except that the incorporator must be at least 18 years old.
Can a person under 18 years old be a director, officer or shareholder?
Yes. No restrictions are placed on who can own shares in or manage a corporation.
Does a corporation have to issue stock?
A business corporation must sell shares of stock in order to capitalize the corporation. This separation provides part of the support for shielding the shareholders from personal liability for the debts and obligations of the corporation. There is no minimum or maximum value that must be assigned. There is no minimum number of shares that must be authorized in the articles of incorporation. It must receive consideration of a value of not less than one thousand dollars ($1,000.00) for its shares prior to beginning business.
Can one person be the shareholder, director and officers of a corporation?
There must be at least one director in a corporation and two officers. The required officers are a President and a Secretary. One natural person may hold both offices and be the sole director. That one person may also be the sole shareholder. A corporation may not be a director of another corporation.
Do I need to publish a notice before incorporating a business?
Only an existing unincorporated business which intends to incorporate without a change in its name publish its intent to incorporate in the local newspaper for four consecutive weeks.
How much is the franchise tax?
The Franchise tax is calculated by a percent of your capital vs a percent of your income. The higher number is due the state. Forms must be downloaded online and mailed to the state.
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